Obama’s and Schumer’s Connections to Fannie Mae [Reader Post]

I am currently reading Reckless Endangerment by Gretchen Morgenson and Josh Rosner. I highly recommend it. This book names names, exposes policies and schemes, and will make you very mad with all of politics of the current economic mess. It documents the role of James Johnson and his tenure at the head of FNMA (Fannie Mae) in the 1990s, and his role in the housing price collapse/financial crisis of 2008. It focuses on James Johnson, Senator Chris Dodd (D-CT), and Representative Barney Frank (D-MA).

The book does an excellent job of explaining their roles, but does not elaborately discuss the role of Senator Charles Schumer (D-NY), nor the connection between Barack Obama and James Johnson, Fannie Mae, and Freddie Mac. So let’s look at the roles of Obama and Schumer.

Prime versus Subprime

We need a concise definition of a prime loan and a subprime loan. I personally never knew that subprime loans referred to loan recipients rather than the loan itself, having heard all my life of the “prime rate.” Hopefully, these definitions will help.

How Did We Get Here?

Being familiar with how we got into this housing price and economic crisis can help explain the politics of the crisis. An article in the February, 2009, issue of The American Spectator, by Peter J. Wallison, does a good job of recapping the current economic crisis. In his article he had two very interesting observations: “The New York Times itself reported in 1999 that Fannie Mae and Freddie Mac were under pressure from the Clinton administration to increase lending to minorities and low-income home buyers – a policy that necessarily entailed higher risks.” and “The fact is that neither political party, and no administration, is blameless; the honest answer, as outlined below, is that government policy over many years caused this problem.” This article, though quite long, does a good job of summarizing the causes of this economic crisis.

Obama’s Connection to Fannie Mae

To understand Obama’s connection to Fannie Mae, we first need to meet James Johnson, head of Fannie Mae during the 1990s. As Morgenson and Rosner state, Johnson was an operator. Johnson (as David Brooks points out), through Fannie Mae, co-opted relevant activist groups, handing out money to ACORN, the Congressional Black Caucus, the Congressional Hispanic Caucus and other groups that it might need on its side. As Jerome R. Corsi writes, during his tenure at Fannie Mae, Johnson personally made $21 million in his last year. Fannie Mae made $100 million while supposedly helping the poor. So he and Fannie Mae had plenty of money to throw around. Couple that with the fact that Franklin Raines, Johnson’s successor at Fannie Mae, received a severance package of $19 million and a payment settlement of $2.6 million, and there is quite a bit of money to throw around.

So, having met James Johnson (and Franklin Raines), let’s explore the connection with Barack Obama, who promised us the most transparent administration in history. Let’s examine Johnson’s role in Obama’s campaign. Johnson was a member of “Friends of Hillary” (Clinton), but soon became a member of presidential campaign of Barack Obama. It’s likely that then senator Obama met Johnson through the Daley political machine in Chicago. Johnson and Chicago Mayor Richard Daley are said to be close. Regardless of how they met, the selection of Johnson to be a part of the inner circle seems to run contrary to Obama’s campaign theme of “change.” It’s also reported that Hillary Rodham Clinton and Obama have met at Johnson’s elegant home to discuss what lies ahead after Clinton quits. Clinton has denied such meetings took place, and Obama isn’t talking. Johnson represents Washington power. He’s the consummate insider – very rich, very connected, and very much behind the scenes.

Both Johnson and Raines raised quite a lot of money for Obama’s campaign. And we see that both Fannie Mae and Freddie Mac made campaign contributions to Obama. And Fannie Mae and Freddie Mac executives offered advice to Obama. Franklin Raines currently advises Obama on housing policy.

And here is another interesting table about “our president” from Open Secrets. Check out the very last entry in this table!

In September, 2008, Lehman Brothers filed for bankruptcy. And AIG, which collapsed in September, 2008, was bought (bailed out) by the Federal Reserve after an infusion of $85 billion. The Lehman Brothers collapse can be traced back to Fannie Mae and Freddie Mac. And the AIG troubles were also caused by bad bets it made insuring mortgage-backed securities bought from (you guessed it) Fannie Mae and Freddie Mac.

Fannie Mae’s and Freddie Mac’s mortgage lending policies were creations of the congressional Democrats and the Clinton White House, designed to make mortgages available to more people and, as it turns out, some people who couldn’t afford them. Obama’s campaign ads and speeches attack Senator McCain and Republican policies for the current financial turmoil. It is not Republican policy. Worse, it appears the man attacking McCain – Sen. Obama – was at the head of the line when the Democrats lined up at Fannie Mae and Freddie Mac for campaign contributions.

Schumer’s Connection to Fannie Mae

From a 27 January, 2010, article in the Wall Street Journal, we learn that New York senator Charles Schumer wanted the already failed Fannie Mae and Freddie Mac to guarantee low rent for tenants of a property on which the owner defaulted. Both Fannie Mae and Freddie Mac have been losing billions of dollars each quarter to serve President Obama’s political goal of modifying troubled mortgages. They can lose more by serving Mr. Schumer. Schumer said after Stuyvesant Town’s owners defaulted, “Now Fannie and Freddie must guide this process to a conclusion with the least amount of impact on current tenants and families. I am going to watch them like a hawk to make sure they do just that.”

We also see that Senator Schumer promoted an extension of housing subsidies and “No Money Down” mortgages backed by Fannie Mae in Nassau and Suffock counties in New York. Mr. Schumer’s press release states that “Raising the eligible income level slightly means a substantial number of struggling, hard-working families previously ineligible but no less deserving, will be able to get help in buying homes.”

From Senator Schumer’s own Internet web-site, we get this (dated 11 October, 2007): “U.S. Senator Charles E. Schumer (D-NY) today unveiled new legislation that would significantly enhance Fannie Mae’s and Freddie Mac’s ability to facilitate refinancings for U.S. homeowners on the brink of foreclosure.” He continues: “The new legislation strengthens a proposal first offered by Schumer in August and comes on the heels of a series of meetings Schumer has convened with Fannie Mae, Freddie Mac, and the pair’s regulator, the Office of Federal Housing Enterprise and Oversight (OFHEO).” He is quoted as saying: “This bill provides a lifeboat for the millions of homeowners left stranded by the Bush administration amid a sea of subprime turmoil,” said Schumer, the Chairman of the Joint Economic Committee and the Senate Banking Subcommittee on Housing. “The interest rates on two million home loans are due to increase radically, but the President won’t adjust his radical ideology. But that doesn’t have to be the last word now that Democrats in Congress are coming together to take steps the administration won’t.”

Where to Stop

The biggest problem I face is knowing where to stop! The more I research, the more I find. It’s all here – the Fannie Mae and Freddie Mac antics, the actions of Obama, Schumer, Dodd, and Frank in particular, and the entire Congress in general, the Wall Street financial banks, and the insurance companies. But scant attention was given to this economic and financial meltdown by the MSM until it became too big to ignore. So now we, the taxpayers, are forced by politicians to pay the price.

Blake

Warren, this is old news- if I had my way, I would kneecap ALL of the above-mentioned people, because they knowingly and venally chose to do this to the American people. When a person is culpable, they did a thing with full knowledge of the probable consequences. As a carpenter, I have had more down and dirty experience with the end result of this theft that has been the bane of the economy, and now, it is self-perpetuating- the old “chicken and the egg” story.
Housing and new construction are the backbone of this economy, and housing provides at least half of the jobs we have list- the figures are really closer to 20% in terms of all the trades that now sit idle.
The jobs won’t come back until we can put these people to work, and we can’t do that until we do something about the housing situation.

Galloway

Forgot one othere name , Jamie Gorelik , she made off with , i think, 20 million bucks for her service at Fan and Fred. Seems fan and fred were a slush fund for dems. My father, who has since passed away, told me all this collapse has been planned to blame the free markets.
He was right, and the socialists now have their chance to continue the collapse and let the IMF or the UN run our country. Our people are a little more enlightened now about the immoral dems but not enough, i fear, to save us. We will know near the 2012 elections if people in the US have gotten informed about these keynsians , and the years they invested to take down the free market.

oil guy from Alberta

That smuck Schumer has taken over 9 million $ in political donations from Wall Street during has despicable political career. He then was a prime mover for the Dodd- Frank banking bill that put Wall St bankers under the bus. Weiner was a Schumer understudy and enabler. New York is a democratic cesspool and has been for years.

Galloway

Thanks for that info. Warren, I was sitting with my father when , I think it was schumer in September 08 , making an annoucement on Fox News about a certain bank that may be on the verge of collapse. He was trying to sound so concerned but my father said schumer was fully joyed in that announcement because that moment ended McCains chance at winning.
It was a September surprise , they knew more was to come. Their plans had come into play just in time to give us Obummer for pres. Free markets would be blamed along with republicans. O and the dems are above the law and we are paying hell for it.
All of The O voters i know are hanging their heads and don’t want to talk about the damage they helped bring on the US because they were to lazy to get informed.

retire05

Warren

A few years back, Professor of Economics, Stan Liebowitz, wrote The Anatomy of A Train Wreck. Professor Liebowitz goes into how Bill Clinton took a little recognized piece of legislation, the Community Reinvestment Act, signed by Jimmy Carter, and put it on steroids. The CRA required banks to throw standard lending practices out the window, and instead required banks and lending agencies to apply affirmative action to their lending histories. i.e. if a bank had a demographic that was 30% black, 12% Hispanic and the rest were white, the banks loans had to reflect that by granting mortgages to 30% blacks, 12% Hispanics and the rest white.

The policy was implemented due to a report from the Boston Fed that said banks and other mortgage lenders were “redlining” minorities, a practice that basically denied people loans based on their color. Consequently, Clinton ordered the GSEs to back more of these loans and the lending agencies came up with creative lending practices to put people in homes who could not really afford them. Hence, the design of no-money down loans, low introductory interest rate loans by which the interest remained at 2-3% for a couple of years, and NINJA loans (no income, no job, no assests), first time buyer loans and a number of creative loans. No one questioned the accuracy of the Boston Fed report for a couple of years until Professors Liebowitz and Day decided to take the Boston Fed report apart. What they found was remarkable. The Boston Fed had fudged its findings and the very people that they claimed had been “redlined” over race, were actually ineligible for loans, had bad credit histories, and had no possible way of ever being able to meet the mortgage commitment. But in the meantime, the government went even further. If a bank was even suspected of not meeting the CRA standards, that banks name was published in the local newpaper, causing loss of business by false accusation. Ever bank, to this day, is required to have a CRA officer who reports to the federal government the racial breakdown of their mortgage loans and if they are not meeting demographic quotas, that bank is denied certain abilities, like building a new branch or buying out a failing bank.

If you look up his name, you can download <Anatomy of a Train Wreck for free.

But it gets worse: under Clinton, the GSEs were required to guarantee at least 50% of these subprime mortgages. Banks then rolled these subprimes into block like a stack of cord wood. They then sold the subprime mortgages to the GSEs or to large groups like Bear-Sterns to be picked up by long-term investors. When the home buyers saw a number of things happening (interest rates increasing, taxes increasing) the increase in their mortgage payment had not kept up with their wage increases and they began to default. Mortgages became like dominoes. As more and more homes wound up on the auction block, the housing market became glutted and there was a market with more product than buyers, consequently values plummeted as always happens in a buyer’s market.

Basically, the housing bust can be attributed to one thing; social engineering through financing by the federal goverment. James Johnson was Bill Clinton’s go-to guy to facilitate the creation of CRA rules and regulations, some of which were written by Barney Frank’s then boy-friend who Frank had secured a job with Fannie Mae. Chuck Schumer even went into neighborhoods in his district to advise minorities on how to obtain CRA loans through the GSEs. Did he do this through the banks? No, he literally went to the people, on the street, giving them advise. And he and Frank knew that this was a bubble that was doomed to burst. But they didn’t care. It garnered them votes, so they stuck with the story that the GSEs were in “great shape.”

Once Schumer and Frank knew the gig was up, they had no alternative but to blame it on Bush, who had warned about the impending doom and destruction of the mortgage industry at least 10 times. Schumer and Frank now knew they had hundreds of thousands of mortgage holders that were facing forclosure. So they got Patrick Kennedy to write a bill that infused $300 million for mortgage relief. Oddly enough, you never hear about that money and the Wall Street Journal reported a year later that only 25 people had secure mortgage relief from that $300 million. But the bleeding didn’t stop, no matter how much money the government poured into it, and homeowners, who managed to cut expenses in order to continue meeting their mortgage obligations, saw their equity plummet due to loss of value, mortgages continued to be defaulted on.

This is what happens when the government tries to bring about a desired result via social engineering. It will not work and creates a false sense of security that will wind up like Jerico’s Wall.

One other item; if you will notice the Open Secrets list of Obama campaign donors, you will see some very familiar names there: Goldman Sacs, Morgan Stanley, USB, and other financial institutions who were promised that Obama would see to it that the worthless mortgages they were holding, which would only increase in numbers, would be guaranteed by the GSEs and taxpayer dollars. This is why Freddie and Fannie continue to lose billions every quarter. Timothy Geithner has transfered treasury funds (taxpayer dollars) to prop up Fannie and Freddie, but no matter how much money he pours into them, neither he, nor Obama, can stop the bleeding.

Blake

@retire05: Bingo!This is exactly what I have been talking about! It is just a pity that liberals can’t or won’t see the catastrophe that they helped facilitate- talk about denial, Bwaney Fwank still maintains that the FMs are in great shape.
I would like to prosecute Franklin Raines, who left Fannie Mae with $60 million dollars. Seems a little excessive, don’t you think? And yet, not a word from Obama on how this man cheated, and got paid waaaaaaaaaay out of the pay scale.

Warren

@retire05: Thanks, retire05, for the Stan Leibowitz reference and link. I have downloaded his article and will immediately read it. As I read Reckless Endangerment by Gretchen Morgenson and Josh Rosner, I get madder and madder. This subject is becoming very dear to me!

retire05

Blake, it has been proven that Raines “cooked the books” so that he could leave with an extremely fat bank account. And Raines didn’t manage to pilpher $60 million; it was closer to $90 million and while he had to pay some of it back (a token payment, really) he left with a fat wallet.

The liberals have no intention of trying to clean up the corruption that is the GSEs. It continues their policy of financial affirmative action, nevermind that they are actually setting up people to fail. In order to “transform” a nation, like with any building, you have to first tear down the existing structure to rebuild. You can’t build a new building on top of an old one. That is the concept of the left, tear down the old to transform the new into their desired Alinsky model using Cloward and Piven philosophies.

Warren, let me know how you like Professor Liebowitz’s paper. As you have seen, it is comparatively short (30 some pages) in relation to the disaster that was created by none other than the federal government. This kind of fraud, and insider trading, landed Bernie Madoff in prison, yet Schumer, Frank, Raines and Johnson are walking around (to quote William Ayers) “guilty as hell, free as a bird.” And don’t discount Timothy Geithner’s involvement in all of this as more and more taxpayer dollars are earmarked to bail out people who should have never been granted a mortgage in the first place.

Once again, responsibile taxpayers (who actually pay into the IRS instead of using April 15th as a payday) are put on the hook for irresponsible people and a federal government who facilitated their irresponsibility. Program after program has been designed to redistribute wealth via a Marxist-styled system. While the left cries that the middle class is disappearing, they do everything to help the demise. Eventually, there will simply be the prolitariate (us) and the politburo (elected officials) who are exempt from their socialist policies. You see, socialism is never for the socialist, it is only for the rest of us. If we truely had a open and honest government, there would be Congressional hearings on this scandal, but the politburo will never go after their own.